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The Transatlantic StormHow a US Trade Deal Will Batter Britain
Whether Biden or Trump wins the coming election, the logic of a trade deal will be another Brexit blow, argues Chris Grey
The growing possibility of Donald Trump losing November’s US Presidential Election is alarming Brexiters, concerned about what negotiating a US-UK trade deal with an administration led by Joe Biden will mean.
Such a deal has long been held up as a key prize for Brexit Britain, though its economic benefit is estimated to be about 0.1-0.3% GDP growth over 15 years so its value is primarily symbolic. It would be far outweighed by the reduction to trade with the EU under any form that Brexit eventually takes.
The symbolism is partly to do with the idea of sovereignty – that this would be an emblem of an ‘independent’ trade policy – and partly because the EU doesn’t have a Free Trade Agreement with the US, so it would show the EU up as lumbering and ineffective. It also harks back to the bitter resentment felt by ‘Leave’ campaigners about then President Barack Obama’s intervention in the 2016 EU Referendum, when he warned that Britain would be “at the back of a queue” for a US trade deal.
Some have pondered that a Biden presidency would enable a UK-US trade deal through the back door. The reasoning is that he might well revert to the Obama policy of joining what is now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a policy abandoned by Trump. This is also now a possibility for the UK. Thus, if both joined, the UK and the US would have a new trading agreement without having had to do a bilateral deal.
However, by the same token, this would have far less of the symbolic glitter of a bespoke agreement with the US. For committed Brexiters, a deal with Trump’s America remains the most attractive option – and a Biden presidency a worrying prospect.
Brexiters Naïve About Trump
Brexiters have always been unrealistic about what Trump would do for them. Periodic announcements since his election that Britain was now ‘first in line’ for a deal came more from his own obsessive need to repudiate anything and everything that Obama had said and done, rather than any principled commitment to the Brexit cause.
In reality, the Trump administration has blown hot and cold about the priority afforded to such a deal, with the President failing to meet his commitment at the 2017 G20 summit to deliver it “very, very quickly” and, following the 2019 G7 meeting, to do so by July 2020.
This is not a surprise. Trump’s entire presidency has shown his capriciousness and inconsistency. The idea that his chumminess with Nigel Farage and links with other key Brexiters would yield tangible outcomes was highly naive. The constant churn within his own administration shows his personal attachments are fragile and ephemeral.
The nature of what the US will seek is relatively independent of who the President happens to be.
But there is more at stake than personalities.
Trump has a consistent political ideology to put ‘America First’ and be protectionist about trade. So, even if his personality was different, the possibility that he would give the UK a ‘good’ or even a quick deal out of sentiment has always been naïve. In fact, the combination of that ideology, the keenness of Brexit Britain to do a deal for symbolic reasons, and the relative economic strengths of the two countries means that any deal done would almost certainly be more advantageous to the US than the UK.
In any case, presidents don’t themselves negotiate trade deals – although they can frame and facilitate them politically – and don’t have a free hand in agreeing them. It has long been made clear by Speaker Nancy Pelosi that Congress would not allow Trump to make a deal with the UK which in any way undermined Northern Ireland’s Good Friday Agreement (GFA).
A Biden Presidency Would Make the Same Demands
Brexiters expected far too much of Trump but they and others misconstrue what would change under a Biden administration.
Clearly there would be differences. He is pro-EU, unlike Trump. He is known to regard Brexit as a mistake both in itself and as being damaging to US interests. And his strong personal and political connections with Ireland mean that he is unlikely to do anything to damage the Good Friday Agreement.
But none of these things precludes a UK-US trade deal. Rather, a Biden administration would be seeking similar things from a deal to Trump, using a similarly tough and experienced negotiating team, and preying on the same UK vulnerability caused by its political desire for a deal.
We know, in outline, what these things are. They include, in particular, enhanced access to UK agricultural, pharmaceutical and healthcare markets. At stake here is not so much tariffs as reducing regulatory – or non-tariff – barriers. Allowing ‘chlorinated chicken’ has become the widely referenced example, but that is really code for far more extensive regulatory changes that would be sought over food, environmental safety and other standards.
These and other changes – especially those affecting the NHS – would of course be very politically contentious within the UK. Perhaps that would scupper a deal. But that’s not the point. The point is that the nature of what the US will seek is relatively independent of who the President happens to be.
Many of them are things which the US sought during the Transatlantic Trade and Investment Partnership (TTIP) negotiations with the EU under Obama (which subsequently collapsed under Trump). Brexiters were happy to use the concerns about TTIP as one of the arguments for leaving the EU, so it is opportunistic for them now to dismiss them.
But, more to the point, the capacity of the UK to resist US demands is far less than that of the EU because of market size and the need to do a trade deal at almost any price – a fact well-known to the US.
Sovereignty and International Trade
There is a deeper issue, though, which goes to the heart of the incoherence of the idea that Brexit delivers sovereignty.
The US demands are primarily regulatory and, ultimately, not just about this or that product or industry but about wholesale alignment with US regulatory standards. The UK may or may not accede to that and it will depend, in part, on what is agreed with the EU in the meantime. Either way, there is no way of avoiding the fact that there are really only two regulatory frameworks in the world: the US and the EU (perhaps China will one day become another, but Britain won’t).
Regulation is central to modern international trade because the biggest trade barriers are no longer those of tariffs but of non-tariffs. Many Brexiters don’t understand this, partly because they typically operate with a 19th Century view of trade in which tariffs loomed large and partly because they often subscribe to a neoliberal ideology that markets exist by nature – prior to and imposed upon by regulation – rather than recognising that regulation creates, and is a condition for, functioning markets.
Reducing non-tariff barriers immediately implies the existence of regulations which are both set and enforced beyond the nation state. As soon as that happens, sovereignty in its traditional sense – and that invariably invoked by Brexiters – is compromised. Brexit doesn’t escape that. So the question becomes one of the mechanisms by which regulations are set and enforced.
The European Single Market is one particular way, and by far the most extensive, delivering not only completely tariff-free goods trade but also gradually eliminating non-tariff barriers. This is why it has a more unified international services market than any other, because the barriers to services trade are entirely non-tariff in nature.
What is distinctive about the Single Market is that it achieves trans-national regulation through creating political and judicial institutions, including the European Parliament and the European Court of Justice. This, of course, is why Brexiters dislike it because it seems to supplant national sovereignty. But escaping the EU way of regulating international trade does not restore sovereignty, it just means that similar things are done but without political and judicial institutions – or at least with much less obvious, less accountable, and less transparent ones.
These include Investor-State Dispute Settlement (ISDS) which allows companies and foreign investors to sue governments, sometimes in secret hearings, over ‘discriminatory practices’. ISDS can be, and is, used to challenge things such as environmental and safety standards, sometimes successfully. ISDS was to have been a feature of TTIP, is a feature of the Canada-EU trade deal (CETA), which the Government wants to be the model for a deal with the EU, and of CPTPP, which the Government wants Britain to join – and is certain to feature in any UK-US trade agreement.
Accountable at the Ballot Box?
Thus sovereignty in this context is an illusion. So too is the related idea that the electorate can vote out a government which does trade deals on terms it dislikes.
The difficulty is that – as with the US-UK negotiations – bilateral trade negotiations are normally secret (the EU, by contrast, is relatively transparent) so, unless there happen to be leaks, voters don’t know what is in prospect.
When it is known, whereas EU member states’ Parliaments can vote on ratifying EU trade deals (the UK waived that right as a member), under the Government’s post-Brexit Trade Bill the UK Parliament will have no vote on trade agreements made by the UK. And since trade talks normally take several years, it is very likely that, by the time their content and effects are known, it will be too late for the electorate to make their approval or otherwise known. In any case, elections are rarely fought on a single issue, let alone one as abstruse as trade agreements.
Nor is it a solution simply to have nothing to do with trade deals and instead to rely, as Brexiters often say Britain should in relation to the EU (yet, strangely, not anyone else), on ‘WTO terms’. For apart from the economic consequences of doing so – these are the most basic, entry level, terms which is why countries make trade deals – that still means following a set of rules which are neither made nor enforced by the nation state, and over which any one country has relatively little influence. And, certainly, no British voter ever gets a say in its running.
The lesson of all this is that, whatever the wider arguments may be about the Trump versus Biden contest, the outcome really makes relatively little difference to Brexit Britain in terms of a trade deal.
Anyone thinking that Biden will be ‘nice’ and Trump ‘nasty’ is as naïve as those Brexiters who imagine the reverse to be true. The reality is that the world of trade negotiations is cold and hard, as Britain is beginning to discover, and one which comprehensively exposes the myth of sovereignty in the modern world.
That is not to deny that a Biden presidency would matter for Brexit in other ways. In 2016, the twin shocks of Brexit and Trump together seemed to herald the victory of populist politics to be followed, many Brexiters believed, by the collapse of the EU. There is no sign of the latter and, if Trump goes, Brexit will look ever more anomalous. In a world transformed by the pandemic, it will be less a harbinger of things to come than the residue of a passing nationalist spasm.
It will also show the key difference between Trump and Brexit: whereas the former can be voted out the latter is, for all practical purposes, irreversible.